At the recent Techpoint Innovation Summit, held on September 29th, the attendants spent a lot of time talking about not only about what Indiana has done to be innovative, but how Indiana can continue to be innovative. The stars have aligned to create the right financial, structural and human capital environment that engenders innovation, so how can we use that to our benefit to push ahead?

As companies look to begin or continue to innovate in their industry, there are some important questions that they should be considering in their strategy.

What does innovation look like?
The Summit’s Keynote Speaker, Clayton Christensen, Harvard professor and author of The Innovator’s Dilemma, delivered a rich presentation focused on disruptive innovation–improvements to a product or service that aren’t expected by the market. Disruptive innovators, typically begin on the fringes of the market, where profit margins are lower. Focusing on that specific customer group, they refine the product or service until they can solve the problem the best (often at the lowest cost). Using that experience and knowledge, they apply it to another group of customers and learn how to solve their problems, and keep repeating. By incrementally moving and gaining market share, these innovators gain the momentum they need to move to the core of the industry and oust the giants as champion.

A panel that took place later in the day, on Information Technology, featuring Scott Dorsey and Chris Baggot, co-founders of ExactTarget and our own Kristian Andersen, revealed that Indy’s ExactTarget, somewhat unintentionally, used this same strategy. They began in the low profit margin outer rings – selling email marketing solutions to dry cleaners. They realized that what they were doing for dry cleaners, would work for pizza parlors and other mom and pop shops. Ring by ring they worked their way from the fringe to the center, so that today they’re working with the Microsofts, Best Buys and Charles Schwabs of the world.

Innovators know that success follows focus, and that David doesn’t beat Goliath in direct combat. Rather it’s through planned strategy and incremental steps that disruptive innovators can gain the market.

What problem are you solving?
Problems can share symptoms, and sometimes solutions. Because of this, companies may think they are solving a different problem than what the customer has hired them to fix. Using the case study of “Hiring a Milkshake,” Clayton Christensen illustrated how to shape our conversations with clients to discover what job, or need they are looking to fill.

Clayton shared an entertaining example of a fast food company that was trying to determine how to improve sales of their milkshakes. When they surveyed customers, and then gave the customers exactly what they said they wanted, the company did not see any improvement in sales. It wasn’t until a consultant asked, “What job does a milkshake do?” that they realized what some of their customers “hire” milkshakes to do, or what problem milkshakes solve. They discovered a trend in milkshake buying, outside of the usual dessert choice: people would buy milkshakes for their morning commute, to occupy the long drive. The thick, “viscous” milk shake took at least 20 minutes to drink, and kept them full through the morning – something that the usual donut or banana breakfast couldn’t do nearly as well. By understanding this problem, and how the milkshake satisfied it, the fast food joint can create an experience, that makes these milkshakes easier to obtain and more desirable to morning commuters – tapping into a new market of consumers.

By understanding the problem at hand, innovators can craft a better solution, or even a better experience that mirrors how these customers experience life.

How do you develop the solution?
Developing the solution is heavily dependent on your resources – both human and financial. On the human capital side of the ball, Indiana boasts a host of private and public universities, developing the talent needed to tackle these problems. Many universities, like Butler, even have programs like the Business Accelerator that expose students to real life business challenges, and plant the seeds for lasting connections with Indiana businesses. Combined with our Midwestern work ethic, we are able to create dynamic teams, devoted to the work, and willing to put a lot of sweat into the solution.

On the financing side, another panel exposed venture capitalists inner thoughts – how do they decide what to invest in? One of the panelists, venture capitalist Bob Compton, recommended entrepreneurs step away from the business plan forecasts, and dive into prototyping. Get actual customer experience with the product, and use this feedback to rapidly iterate the working model. By working with the prototype in a live environment, not only can you prove the concept, but you are also equipped to create a compelling story for potential investors.

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To learn more about Techpoint or catch up on what happened on the 2009 Innovation Summit, check out their web site, blog, and Twitter.